Very few professions in life are setup to NOT include a team. Even professions that are normally considered single entities require a team. Doctors must have an office staff. Lawyers need research assistants. CPAs need billing clerks. The point is that most every business needs to build a team to succeed. In Real Estate Investing it is no different. However, the team you build here is usually volunteer and they are 1090 type team members. Therefore, it takes a little more talent to build a volunteer army. However, if you make it worth their while, it will pay you beyond your wildest dreams. That’s our goal. We want to surround ourselves with high quality people that are getting paid for their services and remaining loyal to us. So, who are the entities that make up this team. You know each of these professions. However, you may not have known how they interact with your real estate business. These 7 Key Resources™ are the “key” to unlocking your success in real estate.
The first Key Resource™ is Professional Money Lenders. These group of professionals are the normal suspects that provide the large sums of money for financing. There are three critical groups under this heading.
Lending institutions are the large institutions that lend to all sectors of real estate. Wells Fargo, Washington Mutual, Aurora Mortgage, Mellon Mortgage are just a few of these institutions. Usually, they are less flexible and more expensive. Another small known fact is that these types of lenders will tend to cut you off from lending as a group at around four to six loans in a 12 month period. The point here is that if you want to do more real estate than four to six properties a year, you have to plan for some more creative solutions.
Local banks tend to be a little more flexible and less expensive to work with. Moreover, by establishing relationships with these institutions, you may be able to get the local bank to do a few more loans each year. Sometimes they will do two or three extra loans per institutions.
Hard money lenders allow you to be very flexible. However, they are usually very expensive. You need to ensure the deal works with all of the interest, fees and penalties that may occur. Another thing to key on is the rate. I have often been asked what is a good rate. The answer is: Whatever get the deal done with the best profit model. I have completed deals where I paid one hundred and twenty percent where I made six figures and I have accomplished deals where the rate was six percent and I broke even. The key point to remember is make money every time. The rate doesn’t matter as much as the deal.
Hard money does not carry that term because it is easy. You must be wary of all the fees associated with any transaction. Create a matrix and enter all critical information:
- What each fee is
- What each penalty is
- What the interest rate is
- What types of deals the lender likes to do
- High Risk
- Low Risk
- Residential
- Commercial
- High Dollars
- Low Dollars
Put together each category so that you can make a solid decision as to which lender to use for each situation. If you do not like a particular hard money lender’s rates or fees, do not eliminate them from your team. There may be a time when you would need their assistance. There has been many times when I ran my favorite lender out of money and had to use another. These are just resources that you can rely on in the future. Treat them all well, you will probably need them all at one time or another.
The second Key Resource™ is Private Money Lenders. These individuals (usually) have very little to no experience in lending. They are individuals who happen to have some extra money and are not use to lending. Usually they are not accredited investors. The key to opening this resource is to establish good relationships with people who have money. Then, after some time and seeing you perform they will loan you small amounts initially to allow your business to grow. The money will increase with confidence. They can loan you money for down-payments, fix-up costs and money to make up the difference when a hard money lender will not lend the amount necessary to acquire the property.
These private money lenders are easier to find than you think. They are you friends, acquaintances with money and family, usually in the order mentioned. You will be able to work with your friends first because of the trust relationship you have established with them. Generally, your acquaintances will need some factual evidence and maybe some positive proof before they begin to lend to you. Your family will need absolute proof prior to lending you money in most cases. The order can be mentally disconcerting. We all wish we could work with our family. However, when someone has argued with you as a youth and even changed a diaper, they are less likely to look at you as an authority figure. However, as you show success they will come too.
The third Key Resource™ is Credit Partners. These are the individuals who will lend you their credit. You may say that you can use your own credit. However, after four to six loans the bank WILL cut you off as was mentioned above. If you don not gather this resource together you will be stuck with the small amounts of deals that you have done so far in the year. Once this limit has been reached, it is imperative if you want to continue to build relationships that will allow you to continue doing real estate to earn a living.
It can be easy to find those willing to assist you in your endeavors if you ask in a non-threatening way. There is a technique my father taught me called asking “through” people. Ask like this: Who do you know that would like to make an additional twenty five to fifty thousand dollars in the next twelve months with real estate? Notice, I am not asking AT them, but rather through them (Who do you know…). Another key point is that it is an open ended question. It could easily be a yes-no question by subtly changing the first sentence to: Do you know anyone who would like to… The point is this, in any conversation it is best not to back them into a corner. Give them some options and they will surprise you. You will begin to hear statements like, “what about me?” When you do, you can respond very non-threateningly.
The fourth Key Resource is Deal Makers™. This group of professionals perform the key tasks of getting the deal started, processed and finished. Finding quality individuals and companies here can make the difference between lots of money and lots of frustration. The other very important piece to remember about this resource is that it is NOT suggested that you use rookies in this category. A rookie in this area can cost you all your profit. Contrary to Nike, “Just don’t do it!!!
Loan Officers are very key to making deals happen. Everyone knows what they are used for. So, I will give you the two critical things that you need to talk to them about. First, the loan officer needs to understand how to expedite the deal and get it done fast. Getting loans done slow can cause you to spend a lot of money in penalties and fees from your hard money lender. Second, you need to build a relationship with your loan officer that helps him or her to realize that you are a source of deals and not a single deal. A source is an entity that can create residual income for you. You should find a loan officer that understands that.
Mortgage Lenders are those individuals and companies that can own the loan process. People may ask, “Isn’t that the same as a loan officer?” The answer is mostly yes. However, there are a couple of things that some mortgage lenders can do. First, some mortgage lenders have their own money. What’s meant by own money is that they literally have their own cash on hand versus most banks and mortgage companies borrow their money to lend to you. These companies can process loans much faster than regular banks. First Horizon Home Loans is one such institution. However, do your own research in your area and find an institution that has their own money. Second, these entities can if necessary perform very fast. I have seen results in forty eight hours.
Real Estate Brokers can perform some tasks that real estate agents can not. They can adjust commissions. This is very valuable. If you are running multiple deals through an agency, the broker can make the decision to accept percentages less than normal. They can also do broker price opinions (BPOs). They will do a minimized appraisal that is usually twenty five to thirty percent of what an appraisal might cost.
Title Companies – Attorneys are very important to getting the deals closed. Look for a company or attorney that is flexible and investor friendly. They must understand how to do a double close. Money is not always in the bank on time. The closing company must be able to move money around in their accounts to get deals done. They need to close the deal even if the money isn’t there. the point is that they must be creative and willing to do what it takes to get the deal done with you.
Many title companies also will have on hand the Notice of Defaults (NOD), Notice of Trustee Sales (NOT) or Sheriff’s Sale. If you agree to close your deals with them, they may provide this list free or for a nominal cost.
Appraisers can make or break the deal. They can appraise the property for much lower or higher than is right and change the way the lenders are willing to fund the deal. Also, they need to understand how to do a “subject to” appraisal. A subject to appraisal is where the end number is subject to certain criteria, usually repairs being done and approved. Moreover, the appraiser must be fast and respond fast to work with you.
Deal Finders allow you to evaluate deal instead of always finding them. J. Paul Getty said,
“I would rather have one percent of one hundred people’s effort than one hundred percent of my own effort”
It is best to have a number of people finding deals for you and you evaluating deals. Leveraging other people’s effort is critical in keeping you flush with real estate deals to evaluate and work on. There are many people you can get to help you. It is really unlimited in this way. However, here are four categories of individuals that should work well with you.
Number one is stay-at-home-moms (SAHM). There is a tremendous work force of highly qualified, high intelligent women who have chosen to stay home and raise their children. I applaud them for their decision. Think about what an extra thousand dollars a month means to a family entity. That is an extra car payment and wardrobe! Single mothers also have motivation to assist in finding deals if they can work around the children. Students in late high school or college also are a group that will find deals for you. A thousand dollars to a college student is a gold mine and they can make it last for months if necessary. Rookie real estate agents are highly motivated to find their first deal or to gain momentum in their business. ninety seven percent of all realtors fail within their first year (National Association of Realtors NAR). Ninety nine percent fail within their first three years and ninety nine point nine fail within the first five years. It takes a special individual to succeed in the retail real estate industry.
Construction Partners fix the broken houses/properties and turn them into homes, businesses and office complexes. Make sure you do not use rookies here either. Use qualified, insured and bonded individuals and companies to complete the repairs on your properties. I know many will not listen to this next sentence. However, DON’T do the work yourself. The few dollars you save will not offset the opportunity cost or the deals you could have found while you were working. General contractors are best because they are licensed and monitored by the state. Additionally, they have decided on this practice as a career and have studied enough to pass a state exam.
After general contractors there are the licensed, insured and bonded contractors. If work is not done properly they hold a bond with an insurance company that will complete work right.
Finally, when you are doing deals consistently and have a rhythm working you can bring the crew in-house. Be careful that you are ready to do this. When you do there are mouths to feed and shelter to be provided.
Estate Planners ensure that you keep your fortune after you earn it. There is an old adage, “Its not what you make, its what you keep” While this is a cool saying, its rooted in keen thinking. A good CPA and a good attorney will save you a lot of money in the short and long run. Moreover, they can help you structure your companies and finances to maximize what you earn initially.
In summary, I have met many people who hear this lecture and do not heed it and struggle with real estate. On the other hand, I have yet to find one person that understands team building that has failed in real estate. More so than any other teaching, mentoring or coaching you will get, this is the most important lesson you can learn. Think of this… What would you be worth if you had Donald Trump’s contacts? Exactly, its not the industry you choose, its the team you build within the industry you choose that matters. Choose well you Key Resources™ and you will not struggle toward success, you will race toward it.
